In 2012, two students at Cairo University began working on an app providing services to mobile developers. Instabug, as it is known, has now raised more than $7m in capital, with an estimated 2 billion users. Despite success at Y Combinator, a US start-up accelerator, Instabug has remained in Cairo.
Equipped with an enviable combination of supportive regulation and access to capital, Instabug is just one of many successful Cairo start-ups, with the city taking the top spot for foreign direct investment (FDI) strategy in fDi’s African Tech Ecosystems ranking. A total of eight submissions were received from countries across the continent, with entries judged by a joint panel from Briter Bridges and fDi Intelligence. Judges looked for locations that were actively sculpting their tech ecosystems with supportive regulation, funding and infrastructure.
Download a PDF of these rankings here: African Tech Ecosystems of the Future 2021
In the wake of the 2011 revolution in Egypt, the changing leadership and government paved the way for a thriving tech start-up scene in Cairo. When Flat6Labs launched in Cairo in 2011, the chief executive Ramez Mohamed suggested to Reuters that “the revolution has affected the scene. People learned that they could set their hopes higher”.
The changing regulatory field in Cairo has spurred foreign investors, with growing interest from the Middle Eastern market. Many investors from the region view Cairo as a lucrative gateway to the continent’s untapped tech potential. Cairo has received growing recognition for its tech ecosystem, and Startup Genome’s 2020 Global Startup Ecosystem Report ranked Cairo among the top 100 emerging ecosystems. The city has reported interest from foreign start-ups wanting to establish in Cairo, with founders listing the city’s competitive talent and cost effectiveness as a key attraction factor.
Hubs and incubators
All locations surveyed by the judges were universally keen to highlight the importance of hubs and incubators in building a successful tech ecosystem. Cape Town in particular has an impressive number of accelerators and incubators, and boasts the highest number of co-working spaces in Africa.
Cape Town was awarded second place for FDI strategy after displaying impressive initiative in creating the necessary infrastructure for a thriving tech ecosystem. The city prides itself on its tech start-up scene and credits its vibrant coffee culture with helping the start-up ecosystem evolve. In addition to its start-up incubators, the city also had a nationally funded ‘Innovation District’ which aims to build a strong technology innovation community.
Tesi Rusagara, managing director of Kigali Innovation City, suggested that hubs and incubators are instrumental in bridging cultural and knowledge divides between young start-up founders and more traditional banks and government agencies. Rolana Rashwan, marketing manager of Egypt’s Information Technology Industry Development Agency, also noted instances of start-ups helping each other and offering service exchanges in Cairo’s hubs and incubators. It is clear that the sense of community, access to opportunity and availability of training make start-up hubs indispensable across the continent.
Accessing the talent pool
Access to talent, a critical factor in any tech ecosystem, varies widely from location to location. Whereas Cairo reported companies from Germany flying out to the city to recruit developers for remote work, Lusaka, the capital of Zambia, noted that with only one university there was a struggle to find enough talent. Recognising the urgent necessity of a tech-educated workforce, Kigali, the capital of Rwanda, has moved quickly to upskill the labour pool.
Kigali’s efforts towards improving the city’s tech talent has earned it third place for FDI strategy. Kigali aims to be the talent hub for Africa, and is attracting foreign workers through improved visa access and a high quality of living within the city. This strategy is paying off, with Andela, a Nigerian software development organisation, setting up a hub in Kigali to train software engineers. Indeed, Tesi Rusagara, managing director of the tech cluster Kigali Innovation City, stated that rather than a skills gap there is an experience gap, with Kigali having ample skilled graduates for entry level positions, but struggling to source senior engineers and management. However, as Kigali’s ecosystem develops, it is anticipated that this problem will be resolved.
Rwanda is also in the process of creating a Start-Up Act, which will provide incentives and a policy framework which will accelerate Kigali’s tech ecosystem. Proposed incentives include tax breaks for local angel investors, residency programmes for high-skilled graduates and specific incentives for digital nomad workers. This follows Tunisia’s Start-Up Act, which was passed in 2018 and streamlined the creation and liquidation of businesses, in addition to smoothing customs procedures and expanding technological infrastructure.
While reformed regulations are a useful and necessary step, many locations are still struggling for access to capital. For locations without a well-developed financial sector and venture capital (VC) network, growing their start-up ecosystem can be highly challenging. A joint public–private approach to capital appears to be the most effective, as private investors are more likely to start investing when the local government has a stake in the start-up investing landscape, lending the ecosystem more credibility and security. Cairo reported success with joint ventures between local and foreign VC firms. Co-investing with local VC firms provides foreign counterparts with local knowledge and added reassurance.
Within the start-up sphere, there is growing interest in impact investing. The opportunity for start-up ecosystems to develop while helping the local economy reach sustainable development goals is a significant benefit. GirlHype is a non-profit organisation established in Cape Town and works to give girls from disadvantaged backgrounds the skills to pursue careers in the tech industry. In Nairobi, AkiraChix has trained hundreds of young women in coding. In March, founder Linda Kamau told Vogue that she wanted to ensure that women were not edged out of the tech space in Kenya, and wanted to correct the imbalance “before we end up at the Silicon Valley level”. The active inclusion of marginalised groups in tech ecosystems will be crucial in ensuring the benefits of a digital economy are felt by all.
Cairo, Cape Town and Kigali offer an exciting insight into the flourishing start-up ecosystems present in Africa. The rapid development of regulations, financial markets and education across these cities is an exciting signal of the commitment to support start-ups. With a young, entrepreneurial population, growing interest from private investors and improving technological infrastructure, Africa is the tech start-up sector’s oyster.
This article first appeared in the April/May print edition of fDi Intelligence. View a digital edition of the magazine here.